Date Completed: 7/19/2015 

Name: Bruce Stewart

Street Address: 5905 Kensington Drive

City: Plano State: Texas Zip Code: 75093

Email: bstewart@kbs-cmg.com

Comments:

I am a Direct Investments industry professional who is writing to you today with

respect to the Department's proposed rule defining who is a "fiduciary" by reason of

providing investment advice for a fee or other compensation (the "Conflict of Interest

Rule") and the related Best Interest Contract Exemption (the "BIC Exemption"). I

appreciate the opportunity to comment on this important regulatory action. My

primary concern relates to the Department's definition of "Assets" in the BIC

Exemption. The Department has requested comment on the proposed definition of

Assets and has specifically asked that commenters who believe that additional

investments should be included in the scope of the exemption provide the

Department with information supporting their inclusion. Direct Investment products,

such as non-listed Real Estate Investment Trusts ("REITs"), Business Development

Companies ("BDCs"), energy and equipment leasing programs, and private equity

offerings, are important investment vehicles for American investors trying to save for

their retirement. None of these products have been addressed by the Department in

the Rule or included in the BIC; this will have the impact of effectively making such

investments unavailable to qualified IRA investors. I believe that direct investment

products should be included as "Assets" within the "BIC" exemption either by the

removal by the Department of a "legal list" of "Assets" or by the inclusion of direct

investment products on the "legal list". Direct investment products are distributed by

highly regulated broker-dealers, who must follow rules from the SEC, FINRA and

state regulators. Furthermore, most direct investment products are subject to higher

disclosure and investor qualification requirements than many other financial products.

In addition, FINRA Rule 2310 imposes additional transparency requirements on

broker-dealer distributed direct investment products. Most importantly though, direct

investments are not only a common investment for retail investors generally, but are

also a common investment for IRAs. As of 12/31/14,investors held more than $84

billion of non-listed REIT and BDC shares in their accounts, according to DST

Systems. In 2014 alone more than $16 billion was invested in non-listed REITs and

over $5 billion invested in BDCs. For the year ended 12/31/14, approximately 41% of

the non-listed REIT investments were held by IRAs and approximately 48% of the

BDC investments were held by IRAs. There are almost 3 million retail accounts

invested in BDCs and non-listed REITs alone. Of these retail accounts, 43% or over

1.2 million are IRAs. Non-listed REITs and BDCs serve an important purpose in

portfolios because non-listed BDCs and REITs generally do not correlate with S&P

500 returns, thus providing diversification. Finally, non-listed REITs and BDCs have

favorable standard deviation rates, demonstrating that there is less volatility in their

share price and performance over time, another positive attribute. There is no

principled reason why an IRA investor may not choose to invest in non-listed REITs

or BDCs, not to mention have the option to invest in other product not currently

considered "Assets" such as private equity funds and oil and gas programs. For all

the reasons I mention above, I urge the Department to revise the BIC Exemption in
order to include Direct Investment products within its scope , either by doing away

with a list of specific Assets or by adding Direct Investment products to that list. I

appreciate your time and attention in ensuring that retirement investors are provided

with the broadest array of investment options, while taking all possible measures to

avoid conflicted advice. Sincerely, Bruce Stewart KBS Capital Markets Group 5905

Kensington Drive Plano, TX 75093